New York Cabbies Finally Gain With Credit Card Payments!Consumer Credit | November 20, 2009 at 1:42 am
If you are traveling in New York City, most probably you might have made a credit card payment to a reluctant cabby. Understandably, the cabbie along with his colleagues of the New York Taxi Worker’s Alliance has to pay a fee on every credit card payment that he accepts and it is because of this that taxi drivers are not all that eager to accept credit card payments. The law was first enforced in New York a couple of years ago and since then taxi drivers have been coming up with one pretext or the other for not accepting credit card payments. Some falsely say that the electronic machines used for the credit card transactions are not working.
Earlier the credit card machines might have been a reason for the taxi drivers to be unhappy about the payments that they have to make while taking customer charges, but now these machines seem to be the very reason for the taxi drivers earning more than they previously did. In other cities the cab industry might be still badly affected by the recession blow, but if you take the reports of New York City Taxi and Limousine Commission, the revenues this year, have increased by 13 %. Taxi drivers receiving tips seems to have increased by 22 % when the transaction is taking place on the credit card. Under the cash payment system, the tips seem to have increased by only 10 % in comparison to credit payment.
This shows that the cabbies were totally wrong about their notion regarding credit card payment transactions. They were fully biased against accepting credit card payments without being mindful of the long term benefits. They were all for cash payments. They were also not aware of the advantage they could take of the biases that passengers had develop towards such payments.
The drivers were prejudiced against paying up that extra fee of 5 % for credit card transactions. True, initially that does appear to be an overhead for the taxi drivers who are used to receiving cash without making any fee payments. But what they failed to see was that the credit card transaction system has won them more passengers than ever. Studies have shown that people tend to spend more when they have to make credit card payments than when they have to make cash payments. So a credit card payment mode for taxi fares attracted more passengers than the cash payment mode. As a result, the number of persons taking a cab ride increased with the credit card payment system in New York in the last couple of years. The profits that the cab drivers got due to increased passenger percentage far outweighed the fee that they had to pay up for the services.
Another advantage that the taxi drivers failed to perceive with the credit card payment system was the default tip system which was set at 20 %, 25 % and 50 %. Here too they could earn a lot. But their initial short sightedness made them concentrate only on the amount of money that they would lose as a part of fee payment for electronic transactions and not see the larger benefits.